Aluminium Composite Panel (ACP) - Why governments and insurers need to rationalise their approach

When determining risk factors in any environment, it is vitally important that a rational, fact-based approach is taken.

For instance, when a car insurance provider sets your premiums, they’re largely based on what kind of risk level the insurer perceives you to be. Factors insurers consider can include driver age, driving history and vehicle.

If you’ve had a suspended license or have a history of traffic infringements, you might be lumped into an extra-high-risk category, raising your premiums even higher on top of the normal risk factors. In addition, your risk factor might be further compounded by the type of car you’re driving. Altogether, these and other risk factors make a substantial difference to your premiums.

This is something that is currently sorely missing from the insurance industries approach to high-rise building certification, and the home owner or renter is wearing the inflated cost as a result.

At the forefront of this, is the issue of aluminium composite panel (ACP) cladding, which has recently sent governments and insurers in an often ill-informed spin leading to skyrocketing premium rises.

Questions have been asked and misleading answers provided due to the pressure and risk aversion of many construction participants and professionals.

The cost to consumers

In one case of misinformation, the use of polyethylene core ACP material on the façade was compared to being the equivalent of 5 litres of petrol per square metre of façade area. There has been no fact-based evidence to prove this. And even if it is true, then how is ACP in a building any more dangerous than driving a vehicle where the occupant of the car is sitting on over 60 litres of hi octane fuel?

Another issue arising from the whole debate around ACP is, what is the definition of non-conforming cladding? Much of the cladding installed in Australian high-rises were compliant with the relevant legislation at the time of approval, meaning they met the Building Codes Australia standards.

The objective of building codes has been largely dismissed in that it is a document that attempts to control fire and life safety as it relates to building occupants rather than property protection. The Lacrosse fire was described as a catastrophic event, even though there was little to no injury to occupants highlighting that our building codes cater for instances where some elements may fail.

The issue of insurers raising premiums on buildings with alleged non-conforming cladding has caused premiums to rise, in some instances, a sixfold increase of premiums to property owners.

In one case of a strata or owners corporation, the annual premium was $100,000, it has now increased to over $600,000 due to the existence of ACP. This effectively means that the insurance for the individual unit owners will climb from $1,000 one year to $6,000 the next. The question has to be asked, how will the people on fixed incomes or people living on the pension or other benefits be able to afford this? If they rent, their rent would increase to absorb the cost.

Insurers are not taking into consideration the fact that the building may rightly or wrongly need remediation. All in all the sheer speculation may in many cases cause the value of the property to decline, and this is something we are already starting to see.

The issue of properly measuring risk of fire incidence in the instance of ACP fitted to the exterior of high rise buildings has not been looked at in a rational way.

Many industries and processes undergo proper risk assessment which is the process of sensibly and mathematically justifying the risk and consequence based on each individual scenario and based on a range of factors.

So why not consider a range of other factors for buildings?

The solution

Whilst it may appear to be more complex, government and insurers should look to embrace the probabilistic modelling of societal risk and quickly. This will correctly and judiciously provide a path that results in a balanced and practicable solution that is appropriate to the required level of fire and life safety of occupants and users of buildings. For example, are there rules in place for what can be kept on balconies, are outdoor sprinklers installed etc.

There are many risks in society and fires in buildings do not necessarily rate compared to flying, driving, walking across roads, using public transport etc. Last year in Australia, there were zero deaths due to ACP in high rise buildings.

Façade cladding does not ignite on its own, it needs a fire in the first instance, which if substantial, will damage other parts of the building prior to the attack on the facade itself. The Australian building code and building control system is one of the most robust in the world and Lacrosse has been testament to this.

We cannot stop fires occurring, however we can be better placed to identify risks and profile buildings correctly, where the probability of fire starts are greatly reduced through regimes such as maintenance and regular inspection.

Grenfell was a tragic event. The prolific use of polystyrene type foam insulation trapped under a skin of aluminium composite panel holding it in place for it to sustain vertical and horizontal burning has not been properly investigated nor publically explained. This type of construction in Australia is very rare due to the different climatic insulation provisions applicable here. Coupled with the concept of occupants being told to remain in place in the case of fire and the lack of the most fundamental fire safety systems for a building of its size, the outcome at Grenfell was nothing short of disastrous with extremely grave and sad consequences.

There are many stakeholders, which include the residential apartment building owners themselves, to whom this process will have a great impact, therefore there is a need for sensible, considered and balanced solutions. Probabilistic risk assessment will ensure the risk and consequences are considered while also ensuring practical and effective outcomes for all stakeholders and affordable insurance for owners.